STC options are saved to overcome 10% in Telefónica

The Saudi Teleco released in its results of 2024 few weeks ago some terms of the financial instrument contract that Morgan Stanley is maintained with the American Investment Bank. An agreement by which the Arabs have options for the purchase and sale of shares of Telefónica Through the American entity. Official Sources of Saudi Telecom do not comment.

On the one hand, STC has the possibility of acquiring shares of the Spanish company at a given price and, on the other, of selling company shares also at a certain price. The Saudis have revealed that the exercise price of these options oscillates between 3.38 euros and 4.81 euros And that the expiration of them goes from March 5, 2026 to September 5, 2028. This means, for example, if the action is triggered, STC could buy titles at a lower price than the market; It also applies in the opposite case, that is, if the action sinks, losses have limited at that minimum price.

Thus, at the moment the Saudis have 9.97% of Telefónica, a percentage that effectively reached in early February. Morgan Stanley already helped them. And the American Bank, after the notification of STC, also notified a few days later to the market that had “sales and purchase options” for “risk management” of the positions of the Arabs in the Spanish Teleco. Those options that it maintains are 9.97%, identical percentage to which STC holds, so that would be the extra maximum actions it could access. The American entity, however, clarified in its communication that “none of the operations released in this form implies an additional participation” of STC. What the Saudis would have is a rightNot an obligation to do anything. At the moment, Morgan Stanley holds a 10,756%participation in Telefónica, of which the vast majority are financial derivatives.

In recent months, Arabs have left open the possibility of increasing their participation in Telefónica in the future. Something that transmitted to the market last January, when they had not even reached 9.97% of the teleco. In a communication sent to the SEC of the United States (the supervisor of that country), Saudi Telecom reported that the acquired values ​​are “for investment purposes” and that they have “the intention of evaluating this investment in the issuer continuously and may take the measures they consider appropriate with respect to their investment in the issuer.” With this they imply that their position on Telefónica can vary at any time.

In that same communication, STC added that “they may acquire additional ordinary shares or other emitter values ​​in the open market, through negotiated purchases in private or otherwise, and they may also, depending on the circumstances, dispose of the totality or part of the ordinary shares or other values ​​of the issuer of those that are beneficiaries in one or more transactions.” They also emphasized that “the right to modify their purpose and to formulate and implement plans or proposals regarding the issuer is reserved at any time.”

The truth is that, as ABC published in September last year, in STC plans it can be increased its future position. The sources consulted explained that the High Executive of STC, controlled by the Sovereign PIF fund, had then shown in private circles an interest in being able to reach even 15%.

In spite of everything, if the Saudis came to seek to increase their position beyond 10%, they would have to face the Government’s antiopas shield again, which already had to authorize the rise in participation from the initial 4.9% to 9.97% they currently have. An authorization whose procedure was extended several months in time since the approval of several ministries, such as economy, industry, defense … The latter being the fundamental for national security issues was required. Likewise, the terms of this government authorization have been kept keying for months: neither the government nor STC wanted to express the agreed conditions, as they have been revealed in other cases.

Thus, the Saudis have always shown that they have a vocation of permanence in Telefónica and in their results last year even highlighted the bullish potential that they see to the Spanish company, which now lies around 4.4 euros per share. They have also opened, as they have made public, to other types of agreements with Telefónica. In any case, Saudi Telecom has never come to reveal the concrete terms of his contract with Morgan Stanley, and even asked the American SEC to secretly keep certain details of the information to be made public. The American supervisor agreed to keep several terms of the agreement secretin a resolution of about a month ago since it was considered “confidential commercial or financial information.”

A very long process

The history of STC in Telefónica is that of a very long investment process. According to the documentation published in the SEC, the first reference to the operation dates from mid -June 2023. It was not until September when the Saudi, suddenly, they notified by surprise the positions and intentions they had at that time. First they acquired 4.9% and then, with the help of Morgan Stanley, they bought another 5%.

After that they requested a seat in the Board of Directors, based on their shareholding, which was granted. Since the end of February he is sitting in the Olayan M. Alwetaid body, the CEO of STC, who has been the interlocutor with the rest of the shareholders and the government the last quarters.